Journal Article

How loan modifications affect credit scores

Abstract: Homeowners who receive loan modifications and successfully avoid foreclosure may face another issue, one that is not well understood. It turns out that participation in loan-modification programs may adversely affect credit scores. 1 The magnitude of the impact is unclear because many factors affect what lenders will report about borrowers who seek modifications, and other factors affect how much the credit-reporting agencies, credit-score providers, and lenders will penalize borrowers who have loan modifications on their credit reports. Although both the U.S. Treasury and credit-scoring agencies have tried to clarify the issue, the outcome is still murky.

Keywords: Loan modification programs; Credit scoring systems;

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Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Communities and Banking

Publication Date: 2010

Issue: Fall

Pages: 25-27